Human Resources, Payroll

Who's the Boss? Determining "Employer" Status

Is it possible to hold an employee of a company responsible for damages  and penalties  in  a lawsuit  or audit because they hold “employer” status? Who’s the boss anyway?

In the recently published Administrator’s Interpretation Dr. David Weil, Department of Labor Administrator,  mentioned the definition of the word “employer”. He quoted the Fair Labor Standards Act, or FLSA, defining an employer as ““any person acting directly or indirectly in the interest of an employer in relation to an employee,” 29 U.S.C. 203(d). professional liability boss

So, what’s the big  deal?
Well, in reading this definition of employer the question becomes “Who’s the Boss?”  Here are a few things to consider in answering this question.

  1. According to the FLSA definition, the boss is “any  person”. That is the number one clue  in solving this question. Ok, so what does this  any person have to  do to be considered boss-like?
  2. This person has to “act directly or indirectly”. Perhaps they perform certain duties or have certain responsibilities that qualify. Perhaps this person is in charge of delegating these responsibilities. What responsibilities?
  3.  These responsibilities are related to how employees are treated. “In the interest of an employer in relation to an employee”. Standing in the place of an employer, in representation of the employer, on behalf of the  employer concerning matters relating to an employee(s).  This could be managers, supervisors, directors, and officers of a company. But, owning a title is not the key to employer status. Duties and responsibilities accepted and performed on a regular basis must be considered in determining whether or not you are the boss.

That thing you do!

In a Wage and Hour suit, a Magistrate Judge in South Carolina had to determine whether an individual had sufficient operational control over the workers in question and the alleged FLSA violations to be held liable for unpaid wages or other damages.  Regarding this employer status issue the Judge wrote, “[p]ersonal liability does not require an ownership interest in the corporation; instead, the more salient measure is the extent of the individual’s operational control over the enterprise and its employees.”  So what does all that actually  mean?  Well, the Judge went on to note, in particular, that establishing personal liability as an “employer” requires only that the person “be involved in the day‑to‑day operation or have some direct responsibility for the supervision of the employee,” and that other factors also be considered including whether the person:

  • Had the power to hire and fire the employees;
  • Supervised and controlled employee work schedules or conditions of employment;
  • Determined the rate and the method of payment; and,
  • Maintained employment records.

However, not all of these duties need be performed in order to establish liability as the employer. Also noteworthy, other court cases have determined that not only  the action, but the inaction of a person in representation of the company can be held as evidence of negligence by the worker resulting in damage to an “employee”.

What now?

Employees who meet the FLSA definition and other criteria for personal liability, as person with employer status, will want to carefully consider the position they are paid to handle.

  • Do I get paid enough to take this risk?
  • What is the risk in this organization?
  • Are we doing things right or am I a party to laws being broken and mishandling employees?
  • Do I often feel I am turning a blind eye to areas Big Boss refuses  to address?
  • Am I covered under the company’s professional liability insurance?
  • Do I need to go get my own policy?
  • Maybe I need to get a new job!

Whatever your determination is, you will sleep better at night when  you are secure in your own mind that you are on the right side of the law. When you face any form of an audit (inspection, investigation, or lawsuit) you want to be audit-secure knowing your employer status will not bury you and your family.

How can I truly be audit-secure?
Good question.

  1. Know the law.
  2. Get your information and guidance from sources credible enough to cite in court. (Not Google Search)
  3. Observe the Rule of 3s: Get the same solid answer from at least 3 credible sources.
  4. Write solid policies for your workplace.
  5. Develop Standard Operating Procedures for your policies
  6. Develop accurate job descriptions for every position in your organization
  7. Train all of your workers on a variety of topics and skill-sets
  8. Communicate well your needs, desires, goals, etc.
  9. Internally audit your departments and correct errors as you uncover them.

When you follow these nine steps, you will be able to answer questions appropriately, honestly, and with a level of knowledge most auditors (inspectors, investigators, or litigators) do not experience in their world. How do I know? I used to be one.

Until Next Time, Be Audit-Secure!

Lisa Smith


Lisa Smith is CEO of Andere Seminars, LLC and Chief Content Developer at BeAuditSecure.com. Follow her on Twitter, connect with her on LinkedIn, listen to her Small Business Spoonfuls Podcast, and find more from her in Audit-Secure Authority at BeAuditSecure.com.

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